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5 Key Lessons to Help You Avoid Encryption Trading Traps and Increase Investment Success Rate
How to Avoid Common Mistakes in Crypto Assets Trading
In my Crypto Assets trading career, I have made quite a few costly mistakes. Although these failures were painful, they also helped me grow into a better investor. Today, I want to share the five most important lessons in the hope that they will help you avoid detours in the crypto market.
1. Beware of "Position Bias"
Position bias refers to the illusion that arises when you hold an asset and see its price increase, leading you to believe that the fundamentals of the asset are improving. This psychological bias can cause us to overlook potential risk signals.
Taking my massive losses on Luna as an example. Although I was aware of the decoupling risk associated with algorithmic stablecoins, I underestimated the actual likelihood of this risk due to my position bias. When UST started to decouple, I should have immediately reduced at least 50% of my position, but I chose to ignore these warning signs and ultimately paid a heavy price.
To overcome position bias, we need to:
2. Establish a clear stop-loss strategy
The lack of a clear stop-loss strategy is another common mistake. Taking Beam as an example, I did not set an effective stop-loss for it, resulting in significant losses.
A good stop-loss strategy should:
Remember, even long-term investments require a stop-loss strategy. If you decide not to set a stop-loss, you must be mentally prepared to bear the full loss.
3. Timely Take Profit
Failing to profit in a timely manner can be one of the most common and fatal mistakes. I made this mistake on Lucky Coin and missed out on a profit of 1.7 million dollars.
To avoid this issue:
Remember, making a profit is always better than not making a profit. Even if you miss out on some gains, it is much better than ending up with nothing.
4. Reasonable Position Management
Mistakes in position management can lead to emotional trading or missed significant opportunities. My advice is:
Reasonable position management can help you achieve considerable returns while effectively controlling risk.
5. Avoid holding too many coins
In 2021, my portfolio once expanded to 40-50 coins. This made risk management extremely difficult.
My suggestion is:
By reducing the number of positions, you can focus more on researching and managing each coin, thereby improving the overall efficiency and returns of your investments.
Summary
Becoming a successful Crypto Assets investor requires continuous learning and improvement. By recognizing and avoiding these common mistakes, you can significantly increase the probability of investment success. Remember, everyone makes mistakes; the key is to learn from them and avoid repeating them in future trades.